In the Israeli-occupied West Bank, too much cash is breaking the economy
[July 20, 2026] By
SAM METZ and JALAL BWAITEL
RAMALLAH, West Bank (AP) — Picture this: A gas station customer pulls
out a wad of bills to pay for a fill-up. The cashier refuses the money,
explaining that the station's bank has stopped accepting notes and coins
as deposits because it already is drowning in cash.
In most places, cash is king. But in the Israeli-occupied West Bank,
having too much is gumming up the machinery of daily life. The
Palestinian banking system has more Israeli shekels than it can manage.
As a result, paper money has gotten harder for residents to spend and
for businesses to put into their accounts.
The excess liquidity stems from a conflict between the Bank of Israel
and the Palestinian Monetary Authority, which oversees Palestinian banks
and financial institutions. Israel limits the amount of physical
currency it takes back from the West Bank. Palestinian officials say the
cap has not kept pace with growth and is one mechanism used to keep the
territory in a state of economic crisis.
Unlike in Gaza, where years of an almost total blockade have caused cash
shortages, banks in the West Bank are running out of vault space to
store stacks of shekels. With Bank of Israel refusing to accept more
notes and coins, commercial banks can’t convert the money into
electronic balances to pay suppliers or process transfers on behalf of
their customers.
“The banks have been shackled” in their ability to deal with the crisis,
Mohammad Manasra, the deputy governor of the Palestinian Monetary
Authority, said in an interview with The Associated Press. “What is
being practiced in the West Bank is economic warfare.”
More cash enters the West Bank than Israel allows out
Central banks in most countries take back cash from commercial banks and
credit them electronically so they can settle payments and meet
customers’ needs. But in the occupied West Bank — where Palestinians
have no say over monetary policies guiding the shekel — the economy runs
differently.
The territory has relied predominantly on the Israeli shekel for decades
and depends on Israel to facilitate trade, collect taxes and process
payments for imported goods under agreements dating to the 1990s. A
surfeit of cash accumulates because the Palestinian economy runs almost
exclusively on physical currency, and more enters from Israel than can
exit.
Why? Employers in Israel and its settlements pay Palestinian laborers in
cash, and Palestinian citizens of Israel often purchase goods like
cigarettes and fuel in the West Bank, bringing in even more shekels. As
more cash flows in, the surplus trapped inside Palestinian banks grows,
neither earning interest nor getting turned into loans, investments and
bill payments.
Israel's cash transfer limit from the West Bank's banking system is 18
billion shekels ($5.9 billion) a year. Banks now accumulate an estimated
30 billion shekels a year, said Moayad Afaneh, an economist who has
advised the Palestinian Authority.
In the past, Israeli officials expressed reluctance to accept more,
citing concerns that returned money could be linked to laundering, tax
evasion or terrorism.
Bank of Israel said in a statement that it follows the current
government's policy on how many shekels to accept but that fewer
Palestinians have worked in Israel since the war in Gaza started,
thereby reducing the cash entering the West Bank.
Israeli Finance Minister Bezalel Smotrich 's office did not respond to
requests for comment but in September 2025 Smotrich threatened to “use
all of the tools” at his disposal to prevent the creation of a
Palestinian state, including “economic strangulation.”
Palestinians say Israel limits taking shekel as economic leverage
Israel has imposed a series of measures that have hobbled the West
Bank’s economy since Hamas-led militants attacked in October 2023,
starting the war in Gaza.
It revoked most work permits for Palestinians who used to work in
Israel, cutting off a major source of income in the occupied territory.
It has withheld tax and customs revenue collected on behalf of the
Palestinian Authority, which in turn has been unable to fully pay public
sector workers — including teachers and hospital staff — for more than a
year.
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A currency exchange employee counts Israeli Shekels at a bureau in
the West Bank city of Bethlehem, Tuesday, July 7, 2026. (AP Photo/Mahmoud
Illean)
 With growing needs for vault space,
banks are having to pay to store and insure cash they're unable to
offload. They're accepting less from businesses and households,
which in turn have to find alternative ways to store cash safely.
The excess shekel problem is “directly affecting the government’s
ability and the private sector’s capacity to continue providing
services to major industrial sectors and the Palestinian people,”
Manasra said.
As an example, he noted most of the West Bank’s fuel and electricity
is imported from Israel or purchased from Israeli utilities. When
banks have too much of their assets tied up as physical cash, they
don't have the funds when their clients — like the Palestinian
Authority or West Bank cities — need to transfer payments to import
fuel, water and electricity.
Fears of looting by Israeli soldiers conducting increasingly common
home raids have made the problem worse, Afaneh, the economist, said.
Palestinians are depositing more into banks because they fear
soldiers will confiscate it, claiming suspiciously large sums could
be used for illicit purposes or terrorism.
Having too much cash on hand also hurts the banks' bottom lines
because they can't lend out money like most banks, which today do so
electronically. A 2022 International Monetary Fund study estimated
excess cash reduced Palestinian banks’ profits by about 20%, a
figure Afaneh said is likely much higher today.
Cash-based businesses in the West Bank have money but can't pay
suppliers
Inside the Ramallah headquarters of the Al-Huda Group, cigarette
smoke and tea steam drift through an office where clerks feed
banknotes into machines that spit out neat stacks of counted bills.
The company operates filling stations, convenience, grocery and home
improvement stores, car washes and other businesses that collect
tens of millions of shekels each month.
Stockpiles of money that cash-based businesses can’t deposit because
the banks are full has made routine operations and transactions more
difficult and expensive, said Hussni Jaber, the executive manager of
the Al-Huda Group.
To make electronic payments to Palestinian and foreign suppliers,
for example, some businesses have resorted to taking out loans or
buying other currencies while also paying more to keep their
overabundance of cash on hand safely stored, Jaber said.
When they can't pay their suppliers, some gas stations have to stop
filling their pumps. The Palestinian Authority in a statement
pointed to the issue when gas stations temporarily closed on
Saturday.
Last month, a number of gas station owners coordinated a 30-minute
strike across the West Bank, including the 22 operated by Al-Huda,
to draw attention to the cash crisis. It has done little to prompt a
response.
With their earnings stuck outside the traditional banking system,
business leaders fear the cash glut will eventually prevent West
Bank companies from being able to import fuel, food and medical
supplies from Israel or elsewhere abroad, Jaber said.
“All sectors will collapse if the cash problem is not resolved," he
said.
___
Imad Isseid contributed reporting from Ramallah, West Bank.
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